The Office 365 Pricing Plans: Simplifying the Confusion

Office 365 pricing plans can be a bit confusing.

Office 365 comes in personal editions, business editions, subscription versions, and multiple plans for all of these.

There is a lot to choose from.

Here, we've sorted everything out for you to help you make an informed decision.

The Office 365 pricing can be divided into two categories: personal and business. Let's start with the personal plans.

Office 365 Personal Pricing

Microsoft offers several different Office 365 plans for individuals:

Publisher and Access are not available on Mac

If you pay upfront for an entire year, the prices are monthly. However, the prices will be higher if you pay monthly.

Here’s how to think of the two plans:

Office 365 Personal = Perfect if you only need Microsoft Office for yourself.
Office 365 Home = If you want your entire family to have access to Microsoft Office, this is a good option.

You only have to decide how many members of your household will need access to Office 365 if you plan to use it for non-commercial purposes. Easy.

Is Office 365 worth the investment for personal use?

I do not think so. The personal plan costs about $70 per year. By contrast, a free Google Gmail account provides access to Google Docs, Sheets, and Slides. In addition to being free for individuals, Google's products are also known for being much easier to use than Microsoft Office. This makes Google the best choice for most individuals.

In the following situations, I would choose an Office 365 personal plan:

Neither my employer nor the industry or organization I worked in subscribed to an Office 365 business plan. In such a situation, paying $70 a year to avoid the hassle of converting documents back and forth is well worth the cost.

Microsoft's extra power was very important to me. While Microsoft's products are known for their advanced features, Google's are known for being easier to use. If I was doing a lot of spreadsheet work, I would get Office 365 Personal just for Excel.

Office 365 Business Price

Business plans are also available for Office 365.

Business plans are built around users, which is the biggest difference between them and personal plans. You'll be able to add and remove users for your company easily. Adding a new employee to Office 365 is as simple as logging into the administrator area, adding the user, and the new employee has full access to Office 365. There is no need to deal with individual computer licenses.

What's more confusing is that Microsoft only licenses its business plans for commercial use, while its personal Office 365 plans are only licensed for home use.

What does that mean?

Microsoft Office personal plans can't be used for business purposes. Are they enforced? No. Is it common for people to buy personal versions and work on their businesses anyway? Sure.

What is the difference between a "business" setting and a "home" setting? There are many of us who work from home. Do personal offices allow this? To be honest, I have no idea. After spending hours trying to find exactly what business and personal versions of Office are licensed for, I'm just as confused as I was before.

There was a clear distinction between the office and home work environments back in the old days of Microsoft Office. Because of the cloud and the ability to work from anywhere, all the lines have blurred.

Fortunately, this isn't an issue most of the time. Your business will need a business plan as soon as there are two people working there so that you can use company email and manage users easily.

Office 365 business plans compete directly with G Suite business plans. We have an in-depth article that describes the differences between the two here.

Each business plan includes Outlook, Word, Excel, PowerPoint, and Access.

However, there is one major flaw in the Office 365 plans.

Every time I look at the Office 365 business pricing, I think to myself: "I must have got something wrong. How could they exclude email from the middle tier? That makes no sense.”

On their pricing page, the middle plan (Business) still does not have company email.

Besides setting up an office suite, you should set up your company email as well. G Suite pioneered this by bundling Google Docs with Gmail. Giving a new employee both an office suite and company email at the same time takes away a ton of headaches.

Office 365 business plans do not include company email except for the lowest and most expensive plans.

There is a major difference between these three business pricing tiers, which we are forced to deal with:

Business Essentials = a nice, low price, but only offers Web versions of the product suite, so you don't get the extra power of Office 365 apps. Does offer company email, though.
Business = Desktop versions of the product suite are available, but there is no company email.
Business Premium = The only tier that offers full desktop apps and company email. I am basically forced to upgrade straight to Business Premium to take advantage of Office 365's core features.

Another hurdle to watch out for: if you start with Business Essentials and use the company email, you won’t be able to use the middle Business tier down the road since it lacks email functionality. In other words, the only upgrade path is to go from Business Essentials to Business Premium which will more than double your monthly bill. The only way around this is to manage email yourself, typically through your web host. Or you could skip Office 365 entirely and use G Suite which has Gmail available on all its plans.

Office 365 does have some legitimate strengths of G Suite, mostly around the power of their apps. Excel runs circles around Google Sheets. If you’re doing serious spreadsheet work, it’s worth choosing Office 365 just to get access to Excel.

But the lack of company email in the Office 365 Business plan makes the purchase decision more complicated. It practically forces companies into the Business Premium version from the beginning, doubling the price of the product.

I really wish that Office 365 offered company email on all its business plans, it’d make a much more compelling offer.

Is it still possible to buy Microsoft Office as a one-time purchase?

Yes, Microsoft has two versions available without a subscription.

Office Home & Student = Word, Excel, and PowerPoint for $149.99
Office Home & Business 2019 = Outlook, Word, Excel, PowerPoint for $249.99

Each option comes with the current version of all the products but doesn’t include upgrades like the Office 365 subscription plans. After a few years, you’ll have to purchase Microsoft Office again in order to upgrade the products.

They also don’t include OneDrive storage, Skype minutes, or cloud versions of the products. They’re old-school one-time install licenses.

Should I choose the one-time purchase option instead of Office 365?

Almost always, Office 365 subscriptions are a better choice.

We don't recommend the one-time purchase edition of Microsoft Office for businesses. The Office Home & Business edition can only be installed on one computer and costs $250. If you plan to hire employees, you'll need Office 365 just to add them to your plan.

One-time purchases only give you access to the current version of Microsoft Office apps. After 2-3 years, your version will be out-of-date and you will have to upgrade again. Once you take these upgrades into account, a one-time purchase is similar to an annual fee.

If you're watching every dollar, I recommend getting a free Gmail account through Google's suite of products.

Is it possible to keep costs down if you absolutely must have Microsoft Office?

In your case, I would recommend choosing Office Home & Student and not upgrading for 3-5 years. As long as you don't upgrade for about two and a half years, you'll be fine. When I was in college, I definitely stretched my Microsoft Office software past any normal upgrade cycle in order to keep my costs low. To this day, I still have Office 2011 installed on my Mac. I wouldn't recommend waiting this long but it can be done to maintain costs.

Otherwise, I’d get the subscription to Office 365 and be done with it.